There is no red flag flying over the headquarters of Aviva Investors London but the fund management arm of the insurance company is seeking a quiet revolution in the workings of the City in order to change our unsustainable habits.

Chief executive Paul Abberley, who is based just across the road from the Bank of England, is well aware that the answer to the conundrum of society's inability so far to address issues such as climate change, resource degradation and the loss of biodiversity lies in systemic change.

He points out that all of society's players are locked into the current unsustainable economic system and that everyone feels powerless to make the changes that are essential if we are to move towards a truly low-carbon economy.

Individual investors are disconnected from the unintended consequences of their investments and therefore are only interested in their returns; investment professionals and companies are measured purely on the profits they are able to accumulate and therefore largely ignore environmental, social and governance issues, and politicians are not prepared to take radical steps through fear of losing their next election.

Everyone may talk the talk on the importance of ensuring that future generations are not hampered by our current behaviour, but when it comes down to it, only a small minority are prepared to actually change.

Abberley's head of sustainability research and engagement Steve Waygood says: "Markets provide the foundation upon which we can grow our culture, values and ambitions. However, these profound benefits to humanity from capital markets are currently being built on an unsound footing. Put simply, we are not meeting the needs of the present generation without encumbering the ability of future generations to meet their own needs. This is inequitable, unjust and the very antithesis of sustainable development."

Given that insurance companies need to take a longer-term view of risks such as climate change, since its customers will be directly affected in the form of extreme weather events, it may not altogether be surprising that Abberley is working to change attitudes within his industry.

But he is rare in the City in that he is not only prepared to put his head above the parapet to bring these issues into the public glare but also is taking action by actively campaigning to try to change the way business is done.

"We are unconventional," says Abberley. "We are contrarian but not radical and we are working within the system. We are taking advantage of a culture within our business that is already pointed in the direction we are going. We genuinely want to be responsible – as part of an insurance company we have a longer-lens to look through. We are trying to do better but not be holier than thou.

"We will do more publicly rather than less on the issue of sustainable markets. We are encouraged to do more rather than discouraged. We don't feel we are banging our heads against a brick wall."

While Abberley may be looking to the far horizon, he recognises that most people are looking down at their feet.

In addition to the short-term financial imperative that most people are working to, he also sees that the frenetic pace of people's lives and the torrent of real-time information prevents them from even thinking, let alone acting, generations ahead.

Aviva Investors is itself subject to this and has been able to attract only £4bn of its £240bn under management to socially responsible investment (SRI) funds. Abberley defends this by saying that SRI funds are like the early days of corporate social responsibility, which was often a bolt-on to the main business.

What he is seeking to do is channel the knowledge from the SRI analysts into the mainstream investment decisions, in the same way that leading companies have moved sustainability into the heart of their strategic thinking. Abberley admits the City is still some way behind the corporate world.

Even within his own firm there are limits. Mainstream analysts don't take kindly to their SRI colleagues telling them what not to invest in. Conversations need to be positively framed, suggesting where profits can be made out of a deeper understanding of sustainability issues.

On a structural level, Aviva believes there are market inefficiencies because markets do not recognise or reward companies' moves towards becoming more sustainable through lowering their access to capital.

Waygood says that beyond that, the City is incentivised not on the absolute value it creates, but "mostly on the relative performance against its peers. So if the value of your funds is declining slower than ones peers as a result of climate change, the view is people will come to us."

Apart from market inefficiencies, there is also market failure because the "externalities associated with unsustainable business practices do not hit the company's profit and loss at all. This is mostly because global governments have not taken the corrective action to internalise the costs onto corporate balance sheets."

Yet, if we have any hope of creating a low carbon economy, Abberley believes we need to rekindle the spirit of the 19th century which led to long-term investments in sectors like the railways.

To help do that, Aviva has engaged Jonathon Porritt at the sustainable development NGO, Forum for the Future, to produce a report on what a sustainable economy will need to look like in 2040.

The reason Abberley has taken this step is because he sees that pressure groups that have been effectively campaigning to change the unsustainable behaviour of companies have not made any impact on the City because the vast majority of them do not really understand how the financial markets works.

"I have never seen from an NGO an analysis of how capital could be shaped to create the 2040 vision," he says. "We owe civil society a debt of explaining how it is that capital is funnelled towards the things we are trying to stop and what can be done to change that."

Aviva has also launched a public campaign to encourage stock exchanges around the world to include mandatory reporting in their listing rules. It believes listing authorities need to both make corporate responsibility reporting a "comply or explain" requirement, as well as requiring the report or explanation be put to the vote at the annual general meeting.

So far the response has been underwhelming, mainly because stock exchanges make their money from the level of trading and are therefore loathe to make listing requirements any more onerous.

In the absence of mandatory reporting, Aviva has been advocating the disclosure of emissions via the Carbon Disclosure Project and 86% of the companies it has engaged with since 2007 have responded.

In order to walk its talk, Aviva last year became the first company in the UK to put its own corporate responsibility report to a separate vote at its annual general meeting.

Aviva is campaigning on several fronts, including pressing for the Chartered Financial Analyst Institute to ensure their training syllabus and the charter holder examination be used to improve the ability of analysts to think through how the sustainable development work of companies will enhance corporate valuation.

It wants stronger regulation of the people that own capital. For example it believers the pension fund sector, in exchange for keeping their tax advantages, should have a duty to show that they are holding their portfolio managers to account by ensuring they are taking environmental, social and governance factors into consideration.

On a broader scale, it wants the development of a public kitemark that would certify to investors that fund managers were being responsible.

Aviva is also calling on the government to require brokers to issue a view on the governance and integrity of the firms they analyse, as currently "on the sell side, it is riddled with conflicts of interest because the brokers are exposed if they call into question the integrity of a company's actions."

For Aviva, it is not only a question of seeking to limit the damage being done by the financial markets and their regulators but to promote the role of the capital markets as being the primary facilitator of a "global green and just economy."

The challenge is that every part of the industry needs to play a part in this and that there are huge vested interests in the status quo. Waygood says: "We need to develop a set of proposals for how individuals and institutions should be incentivised in order that their ensuing behaviour promotes sustainable development. This work would need to be comprehensive and consider intermediaries throughout the capital supply chain, from the originators of capital – people as individuals – through governments, banks, stock markets, companies, primary brokers, secondary brokers, exchanges, fund managers, investment consultants and other financial institutions via equities, bond financing and bank debt and up to companies."

Jo Confino is an executive editor of the Guardian and chairman and editorial director of Guardian Sustainable Business

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